That no bank put in a bid for the three-month loans on offer from the Bank of England was wholly predictable. As I said in my note yesterday, if someone is charging you £6 for five-pound notes, but you can have them at £5.50 in the market down the road, what are you going to do?
The Bank was charging £6, in effect. And the only takers would have been those barred from the market.
So does the total absence of anyone wanting the Bank’s readies mean that the banking crisis is over, that it’s business as usual, that there are no residual liquidity problems for any small banks?
No, no and no....MORE